The pound sterling (GBP) could fall slightly to 1.2675 before stabilizing against the US dollar; any further decline is unlikely to reach 1.2580. In the longer term, the pound could see a further decline; it is unclear whether it will reach the next key support level at 1.2580. According to UOB Group forex analysts, Quick Sir Liang and Peter Shea.
24-hour outlook: “The pound fell sharply for the second consecutive day yesterday, closing down 1.41% at 1.2724. The sharp decline in the pound sterling over the past two days is considered an overselling. However, the pound may fall slightly to 1.2675 before stabilising. Any further decline is unlikely to reach the next key support at 1.2580. Resistance is at 1.2820, a breakout of 1.2870 indicates that the current bearish pressure is receding.”
A look at the past three weeks: “After rising to 1.3207 last Thursday, the pound has seen a sharp decline of 2.87% over the past two days, recording its biggest two-day decline since September 2022. Although this rapid and sharp decline seems exaggerated, there are no signs of stabilization so far. Hence, as long as the pound remains below 1.3000, it could see a further decline. However, it is unclear whether it will reach the next key support level at 1.2580.”
US data this week is at the forefront of the scene. With inflation figures for the US consumer price index due on Thursday, while the results of the US producer price index and the consumer confidence index of the University of Michigan are due to be published on Friday.
This will be the last batch of headline inflation and sentiment figures in the United States from the pre-tariff phase of 2025, representing a key metric for the rest of the year.
Dollar Falls, Pound Sterling Trades Under Pressure
The U.S. Dollar Index (DXY), which measures the value of the dollar against six major currencies, fell to 102.68 on Tuesday, giving up gains over the past week. Market sentiment had improved on speculation of a possible 90-day tariff suspension on all countries except China, an idea that quickly dissipated.
White House denial revives risk aversion sentiment
National Economic Council Director Kevin Hassett’s comments initially raised hopes of easing trade tensions, lifting stock prices and supporting the dollar. But a quick exile from the White House turned the scales. The Dow Jones Industrial Average fell more than 1.5%, while the S&P 500 and Nasdaq turned lower.
CPI data looms
While the White House is signaling progress in reducing inflation, particularly in the food and energy sectors, investors remain cautious. All eyes are now on the March CPI data released on Thursday. Which is expected to provide fresh clues to inflation trends and possible changes in Federal Reserve policy.
This reading may clarify whether the recent decline in the dollar is only a temporary reaction or the beginning of a broader correction. The British Pound (Sterling) is holding above the trend line support at USD$1.2745, following last week’s sharp reversal from a high of $1.3115. GBP/USD is trading below the 50-day EMA at $1.2921 and the 200-day EMA at $1.2846 American, indicating weakening momentum.
Spot resistance is at USD$1.2865, followed by USD$1.3019. On the downside, if the pair breaks through the level of 1.2745 USD. It could lead to a further drop towards 1.2636 USD. The price trend remains bearish in the short term, with the recent rally looking more like a technical pause than a reversal.
Sterling falls on expectations of rate cuts
The GBP/USD pair fell almost 4% from its peak to its low. Compared to last week’s peak of just above 1.3200. A sharp rebalancing in market flows has led the pound to return to the 200-day exponential moving average, forcing long offers back to the average range that the pair has suffered for more than two years.
Markets expect further risk from the Bank of England easing interest rates.
“British Prime Minister Starmer’s response to trade tensions appears to be centered around domestic actions aimed at regulatory reforms and tax breaks for sectors affected by US tariffs. Interest rate expectations have also changed. With markets starting to expect a full cut of 25 basis points at the Bank of England meeting on May 8, adding around 5 basis points over the past week approximately.”
The loss of interest rate support exacerbates the risks of a fall in the pound in the near term. A sharp reversal from last week broke its monthly range. Pushing it to new local lows at mid/below the 1.28 range. The RSI has fallen below 50, in bearish territory. And there does not appear to be any clear support ahead of the lower 1.27 range.
After a tense week that saw the U.S. completely shift to a protectionist trade stance (but without the industry infrastructure to support this), extensive import tariffs were imposed. With the U.S. imposing a flat 10% import tax on all goods from all countries. As well as widely diversified “-for-for-tat tariffs” obtained by dividing U.S. imports by U.S. exports. After imposing additional 34% tariffs on Chinese goods. China retaliated with 34% retaliatory tariffs on all goods destined for the United States.
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